Under terms of the agreement, HTC will pay VIA $147 million and pay WTI $153 million to acquire all outstanding shares of S3, a Fremont, Calif.-based supplier of graphics chips for notebook and desktop PCs, embedded and other products.

VIA acquired S3 in 2001 to accelerate the integration of graphics capabilities with its processor and chipset products. In 2005, WTI invested in S3 to help fund the operations and R&D initiatives. Cher Wang, chairman of VIA's board of directors, is a significant shareholder in WTI.

"The transaction would allow VIA to monetize a portion of its rich IP portfolio, yet retain its graphics capabilities to support the development and sale of its processors and chipsets," said Tzu-mu Lin, a VIA senior vice president and member of the company's board directors, in a statement.

The boards of VIA, WTI and HTC have already approved the deal, VIA said. The transaction remains subject to regulatory approvals and other closing conditions and is expected to close before the end of the year, VIA said.

VIA said it would recognize a capital gain of $37 million and paid-in-capital of $115 million from this transaction.

There are bound to be disputes over patent rights especially in the display aspect of mobile phones, and this is definitely a strategic move despite what might be said about it being an internal financial juggling.
Michiel - http://www.discountdisplays.co.uk

Why don't HTC invest on processor instead of graphic chip. I don't think the graphic chip can help much on the gadgets that HTC makes. BTW, owning some rights on the components it use may be a good idea for big companies.

I wonder if HTC is looking to expand into the larger handheld markets? Using S3's graphics and an ARM processor could open the door to phone/mini-notebooks for example. Time will tell if this is just family book keeping or the tip of a major shift in HTC's product family.

exactly.. to me it looks like a very strategic acquisition to fend off apple's lawsuits. Also graphics processors will be a key element of all next gen mobile app processors. If they license an ARM Cortex A9/A15, they can start making their own app processors or even sell it like apple/samsung.
Since now HTC shares are at all time high, they can simply sell some stock do this deal.